FINRA Backs Off, Former UBS Broker Granted Expungement

Stockbrokers Who Fail Test Have Checkered Records

The WSJ recently performed a study where they combed through brokers records provided by state regulators. The study found that brokers who have to repeat the series 63 exam are more likely to have marks on their records. It also found that more failures on the test typically correlated with more serious violations. In the records of those with 3 or more failures of the 63, there was evidence of unauthorized trades, churning, unsuitable investing, high pressure tactics, impersonations, misrepresentations, and fraud. Brokercheck does show broker exam data but is reviewing policy.

FINRA Backs Off From Expanding Oversight

FINRA has decided to abandon its attempt to expand its reach to registered investment advisers. The primary difference between a RIA and broker is that an adviser has the fiduciary responsibility to always act in the best interest of his or her clients. Brokers only have to make sure that the products they recommend/buy/sell for clients are all suitable. The decision to end the campaign to oversee RIAs came after strong opposition from advisers and a strained SEC budget. The head of FINRA still wants to implement the “clients first” fiduciary standard RIAs use as a rule for broker-dealers.

Ex-UBS Broker Gets $5.4 Million for Lost Business

A broker won 5.4 million in an arbitration panel against UBS whom he accused of costing him a vast amount of business because they misled him about the risk of structured note products which he then sold to his brokerage clients. The notes he sold to half his book were tied to Lehman and almost completely lost value in the wake of the Lehman bankruptcy. The arbitration panel ruled in favor of the broker because it said UBS had held back information on the declining health of Lehman while recommending he sell the notes. The panel also awarded him the expungement of 39 customer complaints that had marked his license that arose due to the failure of the notes.

FINRA Cases Decrease, But Fines Increase

The number of FINRA cases may have slightly declined year over year for Q1, but the fines are up almost 50% according to new data collected by a law firm. Lawyers cite the change is due to an increase in “supersize” fines (>1mill). So far in 2014, top trends from 2013 such as including electronic communications and trade reporting remain priorities.

SEC OKs use of third-party social-media endorsements

In a recent SEC update, the regulator finally budged on some of it’s advertising rules regarding social media. The SEC claims it is now fine for an advisor to publish unedited comments about him/her from independent websites as long as the advisor includes negative reviews and have no connection or influence on the website where it was written. The content when published by the advisor must also be posted neutrally, meaning in a alphabetical or chronological order. The rule mostly pertains to comments written by clients on third party independent websites such as Yelp. Advisors are still violating SEC rules if he/she drafts or submits comments to the third-party review site, pays others to submit favorable comments to the site or suppresses, edits or manipulates the order in which the commentary is presented.